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TMI Blog2017 (1) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ery beyond the period of 365 days. So however, the extent of such delay is not emerging from the discussion in the orders of the authorities below because the Transfer Pricing Officer has confined his working to the delay in the case of associated enterprises alone. The rival counsels agreed that for this purpose, the matter may be restored back to the file of the Transfer Pricing Officer/Assessing Officer. Deduction allowable under section 10AA - Held that:- Income tax authorities erred in setting-off of losses amounting to ₹ 2,14,77,088/- of assessment year 2009-10 from the business income of the current year before allowing exemption under section 10AA of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the Assessing Officer to recompute the deduction allowable under section 10AA of the Act, as above. See CIT VS Black And Veatch Consulting Pvt. Ltd. [2012 (4) TMI 450 - BOMBAY HIGH COURT] Non granting credit for the Fringe Benefit Tax (FBT) paid on 15/6/2010 towards regular income tax - Held that:- Necessary credit deserves to be allowed to the assessee in terms of the CBDT Circular dated 29/1/2010. On this aspect of the matter, the Ld. Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal in relation to whether adjustment to international transaction of sale to Associated Enterprises could have been made without rejecting TNMM method followed by the appellant while justifying ALP. As regards set off of Brought Forward losses of ₹ 2,14,77,088 of AY 2009-10 before allowing exemption u/s 10AA : 7. The Learned Commissioner of Income Tax (Appeals) erred in setting off brought forward losses amounting to ₹ 2,14,77,088 of A.Y. 2009-10 from the business income, before allowing the exemption u/s 10AA. 8. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the exemption u/s.10AA, falling under Chapter III (and not under Chapter VIA), had to take precedence over the provisions for set off of losses, which fall under Chanter VI of the Income Tax Act. 9. The learned Commissioner of Income Tax (Appeals) erred in not disposing off the Ground in relation to non grant of credit of FBT of ₹ 25,OOO paid on 15.6.2009 towards regular income tax by the assessing officer without giving any reasons for the same. As regards addition made on account of Bogus Purchase of ₹ 2,813 10. The learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into by the assessee with its associated enterprises. However, the Transfer Pricing Officer noted that the assessee was making export sales to its associated enterprises as well as to non-associated enterprises. Assessee had made total exports of ₹ 39,77,07,330/- to its associated enterprises. The Transfer Pricing Officer has observed in his order that in the case of both associated enterprises as well as non-associated enterprises, recovery of sale proceeds was made after the credit period stated in the invoices. The Transfer Pricing Officer noted that as per industry average a credit period of 365 days was allowable. Considering the aforesaid credit period as a normal incidence of business, the Transfer Pricing Officer held that wherever assessee had provided credit period to the associated enterprises beyond the period 365 days, in all such cases interest was required to be imputed. Further, the Transfer Pricing Officer determined the arms length interest rate at 10.75% considering the rate of interest incurred by the assessee on obtaining working capital facilities and after putting a mark-up of 200% basis points on such rate of interest to cover currency risk, entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act of the assessee in not charging interest for the belated recovery from its associated enterprises as well as non-associated enterprises, but in so far as the issue as to whether the delay in ultimate realization of export proceeds in both cases is same or not is also required to be verified, having regard to the judgment of the Hon ble High Court in the case of Indo-American Jewellery (supra). A perusal of the said details reveal that the Transfer Pricing Officer has culled out the delay in excess of 365 days in the cases of associated enterprises and for such delay he has imputed interest @ 10.75%. So however, in the case of non-associated enterprises also there is a delay in recovery beyond the period of 365 days. So however, the extent of such delay is not emerging from the discussion in the orders of the authorities below because the Transfer Pricing Officer has confined his working to the delay in the case of associated enterprises alone. The rival counsels agreed that for this purpose, the matter may be restored back to the file of the Transfer Pricing Officer/Assessing Officer. 5.2 As the aforesaid discussion reveals, the preliminary plea of the assessee based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- before allowing deduction under section10AA of the Act. As a consequence the Assessing Officer restricted the claim for deduction under section 10AA to ₹ 52,42,006/- as against an amount of ₹ 2,06,33,279/- claimed in the return of income. The aforesaid decision of the Assessing Officer has since been affirmed by the CIT(A) also, against which assessee is in further appeal before us. 6.2 Before the lower authorities as well as before us, the pertinent plea of the assessee is that the exemption provided in section 10AA of the Act falls under Chapter III of the Act and, therefore, it takes precedence over the provisions prescribing for set off of losses, which fall under Chapter VI of the Act. 6.3 At the time of hearing, Ld. Representative for the assessee emphasized that the approach of the income tax authorities is misconceived since the exemption under section 10AA of the Act is not a part of Chapter VI of the Act and, therefore, the set-ff of loss would not take precedence. In particular, reliance has been placed on the judgment of the Hon'ble Bombay High Court in the case of CIT VS Black And Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom) and also the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The deduction under section 10A, in our view, has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of section 72 which has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter the deductions specified in sections 80C to 80U. Section 80B(5) defines for the purposes of Chapter VI-A gross total income to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable under section 10A, which would not be permissible unless a specific statutory provisions to that effect were to be made. In the absence thereof, such an approach cannot be accepted. In the circumstances, the decision of the Tribunal would have to be affirmed since it is plain and evident that the deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10B was under consideration. The Hon ble High Court dismissed the stand of the Revenue and the following discussion is reproduced in this context:- 4. Mr. Suresh Kumar, learned Counsel for the Revenue does not dispute that the question as framed is covered by the decision of this Court in Black Veatch Consulting (P) Ltd. (supra) Ganesh Polychem Ltd. vs. ITO (supra). However, he submits that the question as framed would require consideration as the contrary view taken by Karnataka High Court in CIT vs. Himatasingike Seide Ltd.[(2006) 156 Taxman 151 (Kar)] has now been upheld by the Apex Court in its order dated 19 September 2013 as under:- 1. We have heard the learned Counsel for the parties to the lis. 2. Having perused the records and in view of the facts and circumstances of the case, we are of the opinion that the Civil Appeal being devoid of any merit deserves to be dismissed and is dismissed accordingly. Ordered accordingly 5. We find that the decision of Karnataka High Court in Himatasingike Seide Ltd. (supra) which was undisturbed by the Apex Court was in respect of Assessment Year 1994-95. Thus, it dealt with the provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-off of brought forward unabsorbed depreciation, which stands on a different footing. For all the above reasons, and having regard to the judgments of the Hon ble High Court in the case of Black And Veatch Consulting Pvt. Ltd.(supra) and Techno Trap and Polymers Pvt. Ltd. (supra), it has to be held that income tax authorities erred in setting-off of losses amounting to ₹ 2,14,77,088/- of assessment year 2009-10 from the business income of the current year before allowing exemption under section 10AA of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the Assessing Officer to recompute the deduction allowable under section 10AA of the Act, as above. Thus, on this aspect assessee succeeds. 7. In Ground of appeal No.9, the grievance of the assessee is against the action of the lower authorities in not granting credit for the Fringe Benefit Tax (FBT) of ₹ 25,000/- paid on 15/6/2010 towards regular income tax. The grievance of the assessee is that the Assessing Officer has not given credit for the aforesaid payment while computing the income tax liability during the course of finalization of assessment under section 143(3) of the Act. Explaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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